SpiralFrog: a new medium

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Just how compelling is free music? SpiralFrog, which offers free downloads with the copyright owners’ blessings, went from zero customers in September to more than 1 million unique visitors per month in late January. And in a visit here Friday, board chairman Joe Mohen touted a new milestone: SpiralFrog has signed up than 500,000 registered users. (Registration is required to download content from SpiralFrog.com; otherwise, visitors are limited to reading music news from Billboard, listening to song samples and streaming music videos -- the kind of thing that’s available on lots of music sites.)

The rapid growth is important, given that SpiralFrog needs to attract millions of eyeballs to survive off of advertising revenue. But what Mohen couldn’t yet say is how long SpiralFrog’s registered users tend to stick around. The service is only a few months old, after all. SpiralFrog’s main advantage over legal outlets such as iTunes and Rhapsody is that it costs nothing, which matches what tens of millions of consumers want to pay for music online. That’s what makes SpiralFrog and other emerging ad-supported music-on-demand services -- such as iMeem and Last.fm -- so promising conceptually. But to hit that magic price point, it imposes trade-offs that the masses may not abide.

Those trade-offs largely stem from conditions imposed by the labels and music publishers, which worry that free services will generate less revenue than they cost in lost sales. Winning the industry’s support has been a tough and expensive slog for SpiralFrog, and it’s not done yet. The company’s efforts to launch a service were also complicated by the departure of its former CEO and other top execs, a shake-up that raised questions about its ability ever to get to market.

When the service finally did launch, it did so with a scatter-shot library of tunes -- a problem that remains perhaps its biggest shortcoming. SpiralFrog has deals with only one of the four major record companies -- Universal Music Group -- and even Universal’s catalog is incomplete. Mohen said the company expects to sign up the other major labels this year. Still, it’s not been easy for the company to sell the industry on the idea of sharing revenue from ad sales instead of generating fixed fees per download, as other online stores and services do. Just last month, he said, he had to turn down a proposal from a major label because it included fixed fees. And even Universal hedged its bets by insisting on a big advance against royalties -- a non-refundable $2.2 million for the rights to operate in the U.S. and Canada. That kind of fee is a real barrier to entry.

Then there’s the DRM factor. SpiralFrog uses Microsoft’s PlaysForSure DRM, which prevent the tracks from being burned onto CD or transferred to other people’s computers. The DRM also renders each song unplayable 30 days after it was downloaded unless the user returns to the site for a brief survey. The point is to enable SpiralFrog to target ads better, leading to higher CPMs, Mohen said. But for some users, the need to renew tracks is an insufferable annoyance. Two other non-trivial problems caused by the DRM: the tracks can’t be transferred onto iPods or played through garden-variety home networks. On the plus side, a wide array of mobile devices do work with the service; I had no problem at all transferring tracks to my iRiver T10, which isn’t even on SpiralFrog’s list of compatible players.

Finally, the company’s need to keep people on the site as long as possible in order to show them more ads has led to some irritating user-interface issues. Just getting to the download page for a particular song can require users to click through multiple pages. And after choosing an album or assembling a playlist, users have to download the tracks one by one. That’s not fun.

Mohen argued that the alternative -- sticking ads into the songs themselves or between songs in a playlist -- was a non-starter. ‘There is an almost pervasive lack of public acceptance for ads embedded in music,’ Mohen said. ‘Every single kid we interviewed said, `We won’t use your service if you do that.’’ And besides, he said, given the choice between paying for music and watching ads, the public overwhelmingly prefers to watch ads.

As Mohen admits, though, the public has at least one more choice: it can download bootlegged copies of songs for free from file-sharing networks. That’s SpiralFrog’s real competition. Mohen sees his company as ‘a medium, not a store’ -- the equivalent of a TV network or radio station that aggregates an audience around music and related content. ‘SpiralFrog is MTV. We’re just the next generation,’ he said. MTV, though, had the advantage of unique programming. What’s unique about SpiralFrog is the business model, not the content, at least not at this point. Still, even with the site’s occasional irritations, the interface and experience it offers are better than what P2P networks provide. Whether those improvements are enough to persuade millions of people to switch from P2P to SpiralFrog, warts and all, remains to be seen. It took Mohen five long years to reach this point, and yet the market for advertiser-supported music is still learning how to crawl.